INTERESTING TRENDS TAKING PLACE IN THE SILVER WAREHOUSE STOCKS

There have been some interesting movements of silver at the Shanghai and Comex warehouses in the past several months. Keeping pace with its downward trend, silver continues to be drained out of Shanghai Futures Exchange ever since the April 12th price take-down.
Traders may say these interesting movements of silver are “Just part of what typically occurs in the warehousing business.”

However, we all in the precious metal community realize there is nothing TYPICAL taking place today in the gold and silver markets.

Here we can see that on April 12th, the Shanghai Exchange held a total of 1,123 tonnes of silver in its warehouses:

In an update that I put out on July 9th, the Shanghai silver stocks had declined a whopping 45% in less than three months:

Here we can see that the Shanghai silver stocks decreased 509 tonnes from 1,123 tonnes on April 12th to 614 tonnes on July 9th. However, according to the most recent data, another 105 metric tonnes have been removed in the past month.

In just one month, 17% of the silver warehouse stocks have been removed from the Shanghai Futures Exchange. So, after a 26% decline in the price of silver since April 12th, the Shanghai Exchange has lost 55% of its silver inventories.

LARGE SILVER MOVEMENTS INTO JP MORGANS CUSTOMER CATEGORY

While the Shanghai Exchange has seen its silver inventories decline in the past several months, a great deal of silver has been moving into JP Morgans Eligible (customer) vaults in just the past three weeks.

I noticed an interesting trend that starting taking place on July 22nd when 600,000 oz of silver were transferred from Scotia Mocatta’s Registered (dealer) category into JP Morgan’s Eligible. During that week there were two more large transfers of silver, each about 600,000 from Scotia Mocatta into JP Morgan’s Eligible.

At the beginning of the week on July 22nd, JP Morgan had 20.3 million oz of silver in its Eligible category and 12.7 million in its Registered, while Scotia had 9.8 million oz of silver in its Registered. If we look at the Comex Inventories as of Friday, Aug 9th, we can see the change that has taken place even though the overall total inventory has remained about the same at 164 million oz.

First, highlighted in red, JP Morgan’s Registered inventory has fallen 21% from 12.7 million oz down to 10 million, while Scotia Mocatta’s Registered inventory declined 44% from 9.8 million oz to only 5.5 million oz — all in three weeks.

Second, JP Morgan’s Eligible inventory has increased 42% since July 22nd from 20.3 million oz to nearly 29 million (highlighted in yellow) on Friday, August 9th. There seems to be a serious motivation by futures participants to move Registered silver from several vaults to JP Morgan’s Eligible (customer) inventory.

Third, even though total Comex silver stocks have remained virtually the same in the past three weeks, eight million oz were transferred from the Registered to the Eligible category. This can been seen in the trend that has taken place over the past year.

There is a lot of speculation we can attribute to the strange movements of silver in and out of the registered category, but you will notice that the trend started to take place right after the QE 3 announcement in Sept 2012.

That being said, there is some motivation of the Comex Futures participants to move a great deal of silver into JP Morgan’s Eligible category. Again, all we can do is speculate why this is taking place. On the other hand, the Shanghai silver stocks have seen their inventories decline a substantial 55% in the past four months ever since the April 12th silver take-down.

Traders may say these interesting movements of silver are “Just part of what typically occurs in the warehousing business.” However, we all in the precious metal community realize there is nothing TYPICAL taking place today in the gold and silver markets.